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Home prices see biggest slump for eight years

Philip Thornton,Economics Correspondent
Thursday 20 March 2003 01:00 GMT
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House prices have suffered their sharpest drop for eight years because of worries over war with Iraq and the economic slowdown, according to a report published today.

The fall, the first for two years, was steepest in London and the Home Counties, the Royal Institution of Chartered Surveyors (Rics) said. Its survey showed the number of surveyors reporting a fall in prices in the three months to February outnumbered those seeing a rise by 10 per cent – the largest figure since 1995.

Ian Perry, Rics' housing spokesman, said: "The faltering housing market has come in response to the growing fears about the situation in Iraq and the direction of the UK economy."

The number of new inquiries has fallen; househunters are taking longer to make decisions, and the number of unsold properties has risen. The number of new sales instructions also rose.

The fall in prices masked a sharp contrast between tumbling prices in the South and boom conditions in the Midlands and North.

The sharpest fall was in the capital, where prices suffered their sharpest fall since the survey began in 1994. More than eight out of 10 surveyors said prices were falling.

There were more modest falls in the South-east, South-west and East Anglia. "Prices have slipped back by varying degrees in all southern regions," the survey found.

But it said that prices continued to rise "fairly strongly" in northern England, with more modest gains in the Midlands and Wales.

There is growing evidence that the seven-year surge in house prices is ending. The International Monetary Fund recently said that a sudden property crash could push the economy into recession. Nationwide Building Society said that prices rose in February at their slowest rate for 15 months while the Woolwich said mortgage lending had fallen 8 per cent in February.

Rics said that the market was poised to pick up. Mr Perry said with interest rates and unemployment at historically low levels, it remained "ripe" for some rebound. "We believe there is potential for the housing market to swiftly rebound, if the political and economic situation shows signs of stabilising soon," he said.

The North-South split was confirmed by surveyors who responded to the survey, with optimism in the North fading in the Midlands and turning to pessimism in London.

Richard Sayer, of Rook Matthews Sayer in Alnwick, Northumberland, said the market was strong. "There is no sign of fears of a price collapse," he said.

Anthony Riddle, of Eadon Lockwood & Riddle in Sheffield, said the market was bucking the gloomy trends reported in the London media.

Quentin Jackson-Stops, of Jackson-Stops & Staff in Northampton, said anything overpriced would not sell while in Oswestry, Shropshire, Jeremy Dell, of Dell & Co, said buyers were "conscious of a market slowdown".

Agents in East Anglia said the war and economic uncertainty were deterring buyers.

In London, agents said the market for luxury homes had stagnated. Peter Lawrence, of Corbett Altman in Harrow, north-west London, said prices of luxury homes had fallen 5 per cent. He blamed uncertainty caused by the impending war. Tim Le Blanc-Smith, of Winkworths, said that many people were building extensions rather than moving.

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